Major onshore projects can trigger global wind power growth

13 January 2011

WORLDWIDE: China's favourable regulatory environment not only puts it top of the wind investment league table but sets an example to emerging markets of the kind of state support required. And with
the US and major European markets slowing down, it may be time for new players to step in

China is expected to continue leading the world in wind power development over the next two years

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The world wind industry maintained brisk growth throughout 2010, although it appears unlikely to match that of 2009, when 38.6GW went online. But 2010 should easily exceed 30GW. The final quarter of 2009 saw a 13GW spurt of development. If repeated in 2010, this would see the world total reach 193GW, closing in on the 200GW milestone.

Given the complexities of the wind energy business and its vulnerability to any number of economic and geopolitical forces, predicting with precision what will happen over the next year or two is a process fraught with difficulty.

Based on most assessments, it seems reasonable to assume that China will continue to set the pace, even if the exponential growth of the past four years seems unlikely to persist. Others are predicting that the US will be stuck in the rut of the past year, when projects have stalled and federal support for renewable energy wavered.

Elsewhere, while there is much interest in the potential of emerging markets in eastern Europe, Latin America, Africa and the Middle East, actual development in these areas has proved patchy. And while the north-western Europe market continues to grow, leading nations such as Germany and Spain show signs of a dramatic slowing down of the rapid growth they have enjoyed in recent years.

Using Windpower Monthly's Windpower Intelligence database, which holds details of more than 4,000 wind farms, we have attempted to pinpoint likely hotspots for development by plotting some of the biggest planned onshore projects due online in 2011 and 2012.

Given the varying levels of maturity of different markets, we have used different criteria for different regions: in North America, with its well-established market and massive development pipeline, the minimum size of projects included on the map is 250MW; in Europe, where projects tend to be smaller, and in the emerging market regions, the entry level for eligible schemes is 100MW. In Asia-Pacific, where fledgling markets such as Australia and New Zealand sit next door to mighty China, we have set the minimum project size at 200MW.

Asia-Pacific

The results, though not exhaustive, give an indication of where future growth is likely to be concentrated. China, unsurprisingly, gives a strong showing, with 25 schemes over 200MW due online in the next two years.

Much of this growth is concentrated around the north and north-west, particularly Inner Mongolia. This part of China is already a global wind energy powerhouse; by the end of 2009 it had notched up 9GW of installed capacity, and its position looks set to be further reinforced, driven by impressive wind resources and by the favourable investment conditions created by the Chinese government and local authorities.

China is now second only to the US in terms of installed capacity but, according to a report in November by consultancy Ernst & Young, it has overtaken the US as the world's most attractive country for renewable energy investment. The report showed that China invested $10 billion in wind energy in the second quarter of 2010 — half of the global $20.5 billion.

The Global Wind Energy Council has predicted that limited transmission infrastructure may constrain development in China. Windpower Monthly's own research has revealed that, across China, as much as 9GW – the equivalent of Inner Mongolia's entire installed capacity – is isolated from the grid. However, the Chinese government's 2008 economic recovery plan suggests the necessary transmission lines will be built, and some analysts have predicted annual growth rates of 15-20GW over the next decade.

United States

Having been displaced by China at the top of the Ernst & Young renewable energy investment index, the future for the US looks less certain. Undoubtedly 2010 has been disappointing for the US wind energy industry, with developers struggling to secure the power contracts needed to get projects built. Some have blamed the federal government's lack of progress on a new national renewable energy standard, but there are also suggestions that falling gas prices have had at least as great an impact.

Nevertheless, the US has an impressive pipeline of 25 projects above 250MW scheduled to come online in 2011/12. A large proportion of these are in a belt running through the Midwest and mountain states, with Kansas, Colorado and Wyoming all set for substantial growth in the coming years.

On the west coast, the state of Oregon is also in line for growth over the next two years, with developer Caithness Energy's giant 845MW Shepherd's Flat scheme due online in 2012. Texas, the US wind power heartland, has just one relatively modest 340MW scheme scheduled for completion.

Instead, the market leaders for large onshore wind in 2011 and 2012 appear to be the UK, Sweden and Norway. Scotland is a key hotspot, accounting for all eight of the UK's 100MW-plus projects. Greece is also set for a busy spell, with developers Terna Energy and the Copelouzos Group particularly busy. The two may jointly build a 345MW transmission line from the Greek mainland to the island of Evia, where both are developing projects.

With all EU countries working towards a binding target of meeting 20% of their energy demand from renewable sources by 2020, and with many having adopted production incentives to help meet this goal, the European wind energy market has plenty of growth in it. However, as the lack of large-scale onshore projects planned in Germany in the coming years suggests, the future for European wind energy maywell be offshore.

Emerging markets highly motivated to develop wind

With respect to the growth of the world wind power industry, much attention is focused on the dominant markets of China, Europe and the US. However, a number of other countries are making big strides forward, notably Brazil, Turkey, Poland and Morocco, and our data reveals this trend is set to continue. These, and other emerging market states in Latin America, Africa, the Middle East, and central and eastern Europe account for 37 projects over 100MW.

The motivations for adopting wind power in these countries are in many ways the same as in more established markets: security of electricity supply, the rising cost of fossil fuels and a need to cut carbon emissions. However, as a clean, free and abundant source of energy, wind has an added attractiveness for emerging market countries, many of which have middle-income or developing economies and are struggling to meet demand for electricity with expensive imported fossil fuels.

According to our data, the emerging market hotspots are Poland, Turkey, Ukraine and Romania in central and eastern Europe, and Chile and Brazil in Latin America. None of the African or Middle East emerging market states have more than one project each planned for 2011 and 2012, though looking further ahead, Ethiopia and Kenya show potential.